The most difficult questions to ask end up being the most important ones. They are usually variations on a single question: What are you going to do with my company the day after this transaction closes?

Too many CEOs follow the ostrich plan, sticking their head in the sand in an unconscious effort to avoid bad news, and the responsibility that goes with it. The moment you hear the answer you feared—that a plant will be shut down, or one of your departments will not be needed under the new ownership—you no longer have plausible deniability when your employees take you to task over the consequences. 

Nevertheless, the only way to make a truly informed decision is to understand in detail the motivations and intentions of your buyer or investor (I will use these terms interchangeably), then identify the conflict points where your goals are not aligned. The match will never be perfect, but your job is to get as close as you can in the areas that are most important.

Sometimes it helps to dig in a little bit by posing some open-ended questions. You wouldn’t be out of line asking: How do you get the most out of a team? What informs the way you lead your firm? If the answer is that the firm combines very high compensation with fear tactics to keep everyone motivated—classic carrot and stick coercion—that will tell you something about how your own employees will experience their workplace under the new leadership.

You would have a very different vision of your company’s future if the potential investor responds that his team does its best work when they are inspired to build something greater than themselves. If people have the opportunity to develop their leadership skills, as well as to stretch themselves, then they will be better both professionally and personally as a result of the time they spend at the firm. That’s a win for the employee, an asset to the firm and a great outcome for the world in general. (Chapter 5 of my book, Selling Without Selling Out, covers this in more detail.)

Some Questions to Ask an Acquirer or Investor:

·      What is your strategy and how do you see us fitting in it?

·      What are you going to do with the business after closing?

·      Describe what a successful outcome would like to you, both financially and day-to-day.

·      What are you concerned about?

·      If it goes poorly, what will have caused it to fail?

The inevitable moments of stress that come up in a sale are perfect opportunities to see how your prospective owner responds to problems. When something goes wrong in your business, notice whether potential investors have constructive advice for you or just pile on unhelpful criticism.

Even if your transaction is among the fewer than one in ten that go completely smoothly during diligence, you can get the same information by asking investors to share their memories of the worst investment of their careers. Ask for the whole story about what went wrong and how they handled it. Does the CEO still work at that company or was he let go? If the investors replaced that CEO, work out how they determined that leadership was the problem, as opposed to other challenges such as collapsing barriers to entry or ultra-low cost competitors who hammered margins.

After you hear the story of their worst investment, probe a little further to see what they learned from the experience. You might hear that they fired the CEO but now regret it, having seen all of the company’s competitors go through the same problems shortly thereafter. They may have learned that when they hire a “professional” to replace a founder CEO, the only improvement they see is in slick-looking reports, and the business continues to suffer.

Ask for the story of their most improved investment. Did they add someone to the leadership that unlocked it or added much-needed perspective? Sometimes you will hear the founder’s skillset was better suited to the role of chairman or board member than that of CEO.

On the day after close, your company will be on a different trajectory. Build a clear picture of that new business and, with that vision in mind, turn the last question on yourself: Is this a company I am proud to have led?